On March 19, 2013, the U.S. Supreme Court issued a unanimous decision in Standard Fire Insurance Co. v. Knowles, a closely watched case under the federal Class Action Fairness Act of 2005 (“CAFA”). CAFA gives federal district courts jurisdiction over proposed class action cases in which, among other things, the amount in controversy exceeds $5 million in aggregate. CAFA was enacted in 2005 to allow defendants facing a proposed class action to remove the case, under certain circumstances, from state court to the more “friendly” venue of federal court.
In Knowles, the proposed plaintiff class representative (and the plaintiffs’ law firm) sought to avoid removal of the case to federal court by “stipulating” prior to class certification that the proposed class would seek less than $5 million in damages. However, the Supreme Court concluded that the stipulation was not binding on members of the proposed class because a named plaintiff cannot legally bind class members prior to class certification, and thus the case was properly removed by the defendant to federal court.